Lead-inQuestions•Thinkofanexampleoftakeover/acquisitionormerger.Whatkindofbusinesswasinvolved?Werebothcompaniessuccessfulbeforeithappened?RelatedExpressions•mergers•acquisition•corporatestrategy•takeover•reversetakeover•stockswap•cashpayment•shareholder•brandingLead-in1.Whichoptionsareopentobusinesswhentheyarecompetingwitheachotherinthesamemarket,iftheywanttoavoidapricewar?Co-operateonpricingpolicies.Formamerger.•2.Whatisoneofthemostexpensiveareasofinvestment(aftersalaries)in,forexample,theautomobileorthepharmaceuticalindustries?•ResearchandDevelopment.3.CanyousuggestawaytoreducethehighcostofResearch&Development?•FromamergerwithanothercompanyinthesamelineofbusinessandshareR&Dcosts.•SetupajointventureprojecttodotheR&Dforthetwocompanies.•4.Whatshouldabigsuccessfulcompanydoifasmalleroneproducescheaperand/orbetterqualityproducts?•Buythemout,inotherwordsmakeanacquisition.•5.Whatadvantagescanbegainedbyco-operatingwithanotherfirmwhenpurchasingrawmaterialsorcomponents?•Bulkbuyingmeanseconomiesofscale.Combiningoftwobusinessentitiesundercommonownership(Arnold2005)OrTwofirmscoalesceandshareresourcesinordertorealiseacommongoalButOnepartyalmostalwaysdominatessoDefinitionofMergerAcquisitionOnefirmbuystheassetsorsharesofanotherTakeoverimpliestheacquiringfirmislargerthanthetargetReversetakeoverifthetargetislargerthantheacquirerFigure1PercentageofPublicCompaniesTakenOverEachQuarter,1926–2005HistoryMergersseemtooccurinwavesPeriodEventscoincidingwithbeginningofwaveEventscoincidingwithendofwaveWave11890’s-1903Economicexpansion;industrialisationprocesses;introductionofnewstatelegislationsonincorporations;developmentoftradingonNYSE;radicalchangesintechnologyStockmarketcrash;economicstagnation;beginningofFirstWorldWarWave21910’s–1929EconomicrecoveryafterthemarketcrashandtheFirstWorldWar;strengthenenforcementofantimonopolylawStockmarketcrash;beginningofGreatDepressionWave31950’s–1973EconomicrecoveryaftertheSecondWorldWar;tighteningofanti-trustregimein1950Stockmar...
